Overlay network clients, such as Virtual Machines (VMs), need default gateways to provide routing functionality. In overlay networks, the data link layer (layer 2 of the Open Systems Interconnection (OSI) model (ISO/IEC 7498-1)) is concerned with moving data across the physical links in the network. In a network, the switch is a device that redirects data messages at the layer 2 level, using the destination Media Access Control (MAC) address to determine where to direct the message. Layer 2 contains two sublayers: the MAC sublayer and the logical link control (LLC) sublayer. Layer 2 ensures that an initial connection has been set up, divides output data into data frames, and handles the acknowledgements from a receiver that the data arrived successfully.
In overlay networks, the virtual switches (VSs) to which the VMs connect provide only layer 2 networking functionality, which renders them unsuitable for deployment in overlay networks. The only situation where present VSs can be deployed in overlay networks is if the entire overlay is considered as one large layer 2 domain. This will make segregation of clients into internet protocol (IP) subnets impossible. Additionally, this will severely restrict the ability of overlay clients to talk to non-overlay devices, due to the explosion of address resolution protocol (ARP) entries on the clients.